EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Question
Chapter 2, Problem 10RQ
To determine
The way that the nominal, real, and expected real interest rate is different from each other and to determine the most important one out of the three in relation to decisions made by lenders and borrowers.
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The Nominal Interest rate and inflation rate in an economy is same.
What will be the real interest in such case?
Economics
Do you agree that there is no difference between the nominal interest rate and the real interest rate? Explain why or why not.
If you are a banker, should you consider the nominal or real interest rate when deciding which rate to charge for a loan? Explain in 250 words.
Chapter 2 Solutions
EBK MACROECONOMICS
Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQ
Ch. 2 - Prob. 1NPCh. 2 - Prob. 2NPCh. 2 - Prob. 3NPCh. 2 - Prob. 4NPCh. 2 - Prob. 5NPCh. 2 - Prob. 6NPCh. 2 - Prob. 7NPCh. 2 - Prob. 8NPCh. 2 - Prob. 9NPCh. 2 - Prob. 1APCh. 2 - Prob. 2APCh. 2 - Prob. 3APCh. 2 - Prob. 1WWMDCh. 2 - Prob. 2WWMDCh. 2 - Prob. 3WWMDCh. 2 - Prob. 4WWMDCh. 2 - Prob. 5WWMDCh. 2 - Prob. 6WWMD
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- Is the Market interest rate commonly known as the nominal interest rate? Why?arrow_forwardIf the nominal interest rate is 5 percent and the inflation rate is 2 percent, then what is the real rate of interest?arrow_forwardWhat is meant by the rate of interest. How is the rate of interest determined? Explain in 500 words.arrow_forward
- Do you think a negative nominal interest rate can happen? What about a negative real interest rate? Explain.arrow_forwardWhat is the difference between real and nominal interest rates? why is the distinction important? What factors change interestrates?arrow_forwardThe variable that connect the market of money and the market of goods via investment spending is: a The MPC b The interest rate c The MPS d The CPIarrow_forward
- Suppose the nominal interest rate is 0.64 and the expected inflation rate is 0.47 1) What is the exact real interest rate? 2) What is the approximate real interest rate?arrow_forward#20.Which of the following statements is correct? a The interest rate that is usually reported is the interest rate that has been corrected for inflation. b The supply of, and demand for, loanable funds depend on the real (rather than nominal) interest rate. c If the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well. d All of the above are correct.arrow_forwardDiscuss the relationship between nominal and effective interest rates?arrow_forward
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